Traders are increasingly betting that the Federal Reserve will deliver a quarter-percentage-point rate reduction at its September 16–17 policy meeting. Fed funds futures on Friday implied roughly an 87% chance of a cut, up from about 85% before the release of July personal consumption expenditures data and building on momentum from Chair Jerome Powell’s comments last week in Jackson Hole. The Commerce Department’s report showed core PCE—the Fed’s preferred inflation gauge—rose to 2.9% year over year, the highest reading since February. Despite the uptick, investors interpreted the figure as consistent with the central bank’s goal of returning inflation to 2% over time, especially after Powell said the ‘balance of risks’ has begun to tilt toward the labor market. Government bond markets echoed the easing expectations. The policy-sensitive two-year Treasury yield slipped to about 3.62%, nearly a full percentage point below the midpoint of the current 4.25%–4.50% federal-funds-rate target range. Such a spread is typically seen when markets anticipate imminent policy accommodation.